Alstom seeks transport deals beyond GE signaling unit

Alstom seeks transport deals beyond GE signaling unit :(Reuters) – Alstom’s (ALSO.PA) purchase of General Electric’s (GE.N) rail signaling unit is “a fantastic deal” for the French train maker, which will continue to seek acquisitions in this field, the head of Alstom Transport said on Tuesday.

Alstom, which also makes turbines for power plants, agreed in June on a 12.4 billion euro ($16 billion) deal that will involve GE buying the bulk of its energy business while it focuses on its better-performing rail arm.

The move had sparked a two-month tug-of-war with the French government, which feared for its national industry and only gave its blessing to the deal after it secured sweeteners – including the signaling acquisition – as well as an option to take a stake of up to 20 percent in Alstom.

The power deal and the signaling deal are expected to both be completed at the same time, in the second quarter of next year, Henri Poupart-Lafarge told reporters at the InnoTrans biennial rail trade fair in Berlin.

The signaling deal will bring Alstom Transport 400 million euros in additional annual revenue and will also generate synergies, though it is too early to detail these, he added.

“It’s a fantastic deal, very complementary to our own activities both in terms of technology and in terms of geography,” Poupart-Lafarge said, stressing it gave Alstom access to the strong U.S. freight market.

He noted that between this deal and Siemens’ (SIEGn.DE) acquisition of Invensys last year, the rail signaling systems sector was consolidating and Alstom would continue to seek deals and tie-ups there.

SECTOR CONSOLIDATION

“We intend to continue to participate in this consolidation … and we’re also interested in the rest of the transport sector’s consolidation,” he told reporters.

Alstom has repeatedly flagged it plans to use the proceeds from the GE power deal to strengthen its rail arm with acquisitions, pay off debt and return cash to shareholders, but the group has yet to provide a breakdown.

“We will have a solid balance sheet that will allow us to fund the acquisitions we want to make,” Poupart-Lafarge said, declining to give any figures but adding that the group would also consider joint ventures.

The government taking a stake would be “a good thing, that stabilizes Alstom”, he said, adding that in the long run, he would also welcome other industrial shareholders.

For instance, Alstom could see its Russian partner Transmashholding, in which it holds a 25 percent stake, take a stake in Alstom in return, he said.

The recent tensions between Russia and the West over the fate of Ukraine have not affected the companies’ day-to-day operations, but they are closely monitoring the situation and hope it will ease, he said.